Money Talks (Spenders): Continued

For those of you who decided that you were too special to do yesterday's exercise, I'll give you the example of a good friend of mine. We'll call her Kristy for now. She made $37,100 last year after taxes and bills (rent, food, cable, etc), and as of January 4, her checking account balance was $340. Now the question I asked was "Where did the money go?" The answer was simple: Kristy likes to spend money as if it was going out of style. Her rationale is, as she explained, money is only paper. It's made to be spent. Sounds like someone you know, right? Well, the truth is, if Kristy got fired today (which is a distinct possibility in this economy), she could not afford to stay in her apartment for a month or pay her car insurance. Now my purpose is not to scold you or put you on a time-out for spending your money foolishly. Hey, you earned it. You can waste it all you want ;-) I'm just here to provide food for thought.

Even though money is paper, it's the paper that makes the world go 'round. So frivolously spending your money isn't really beneficial to YOU because if you don't have any money, your part of the world stops. The bills aren't paid, there's no food, no clothes, you get the point. No one is saying that shopping is bad, or you should live like a hermit on just bread and water. But the key to having more than enough money for that rainy day is to live below your means. Not above, not dangerously on the edge, but BELOW your means. What do I mean by that? I mean that you should only make purchases (outside of the necessities) that you can comfortably afford and won't cause you to scrape by, barely surviving from paycheck to paycheck. You shouldn't be sacrificing meals, living arrangements, or childcare in order to spend money on clothes, jewelry, or other things that depreciate (decrease) in value once they leave the store.

For you spenders that have come to favor the layaway path to flyness....Just as an FYI, the only things that you should be paying for in installments are:

1) student loans (education is a good investment)

2) a house (usually appreciate in value, and over time, equity in the house increases)

3) a car (reasonably priced, you shouldn't be driving a $70,000 vehicle with a $40,000/year salary)

4) furniture sets (not just an expensive couch) - quality, long-lasting furniture is usually more expensive than the stuff you find at Ikea.


However, if you have to make monthly payments on a coat, a pair of jeans, or a pair of sneakers, that means you can't afford them. For those of you spenders who have babies or young children, if you are sacrificing formula, baby food, or daycare in order to get the IPhone, that means you can't afford it.

Many of us look at the lifestyles of people like Jay-Z, Diddy, Beyonce, Paris Hilton, and believe that if we spend our entire paycheck on what they wear and use (in terms of phones and other gadgets), we are just as "fabulous" as they are. The rest of us spend our money on expensive brand-name clothes and other items just so we can say we've got stuff, more stuff than the person next to us. That old idea of keeping up with, or these days, running past the Joneses. But if you have to save all of your nickels and dimes in order to purchase one item, you probably aren’t as fly as you think you are. No offense, but individuals with real wealth don’t have to try that hard. They’ve already got their investments, savings, and stash accounts set up, their homes and cars are paid off, they’ve retired their parents, so the rest of the cash can be spent without a second glance. But those of us who have just a little something can’t wait to turn our money over to other people. Then we complain that African-Americans can’t have anything in the U.S. because the White man has everything. News Flash: If you keep taking water from a well, and the water isn't replenished, THE WELL WILL DRY UP. Plain English: If you continue to give someone else your money and are keeping nothing for yourself, soon that person will have all your money. And, as I said earlier, your part of the world stops.

Bottom line, spenders: No one is saying you can’t spend, but spend wisely. If you continue the trend of spending to impress other people, belittle (put down) other people, or just because you can because you think you’re ballin’ out of control’, sooner or later you’ll find yourself drowning in debt with only your last season Prada and Gucci shoes to show for it.

Keep reading because I have some tips and advice for the savers that you spenders may be able to find useful as well.

Next up: Money Talks (Savers)